Wednesday, December 17, 2014

Cost of solar power (47)

RenewEconomy has a story today about a PV installation at a macadamia processing plant in Northern New South Wales.  Output from the macadamia farm is used by the proprietors, Brookfarm, to make muesli.

This is another feel-good instance in which proprietors of small- to medium-sized enterprises save on their power bills by installing a PV system that meets much of their power requirements during the day.

This particular installation is interesting in that the proprietors installed half of the panels facing east and half facing west.  That way, they help to meet their power requirements in the early morning and late afternoon.

RenewEconomy reported that the peak power is 94.2 kW and that the system cost AUD 233,000.  The article mentions that approximately one third of the installation cost is recovered from sale of small-scale renewable energy certificates.  

I’m grateful to Brookfarm for kindly providing an estimate of the annual output, namely 144 MWh AC grid voltage.  From this, I calculate the Capacity Factor will be 1000 × 144 / (24 × 365 × 94.2) = 0.175.  That figure is no surprise to me given the layout of the panels and the fact that the Northern Rivers region is often cloudy in summertime.

We can now proceed to analyse the LCOE using my standard assumptions:

  • there is no inflation,
  • taxation implications are neglected,
  • projects are funded entirely by debt,
  • all projects have the same interest rate (8%) and payback period (25 years), which means that the required rate of capital return is 9.4%,
  • all projects have the same annual maintenance and operating costs (2% of the total project cost), and
  • government subsidies are neglected.

For further commentary on my LCOE methodology, see posts on Real cost of coal-fired power, LEC – the accountant’s view, Cost of solar power (10) and (especially) Yet more on LEC.  Note that I am now using annual maintenance costs of 2% rather than 3% as in posts during 2011.

The results for the Brookfarm project are as follows:

Cost per peak Watt              AUD 2.47/Wp
LCOE                                     AUD 184/MWh

The components of the LCOE are:
Capital           {0.094 × AUD 0.233×106}/{144 MWhr} = AUD 152/MWhr
O&M              {0.020 × AUD 0.233×106}/{144 MWhr} = AUD 32/MWhr

By way of comparison, LCOE figures (in appropriate currency per MWh) for all projects I’ve investigated are given below.  The number in brackets is the reference to the blog post, all of which appear in my index of posts with the title “Cost of solar power ([number])”:

(2)        AUD 183 (Nyngan, Australia, PV)
(3)        EUR 503 (Olmedilla, Spain, PV, 2008)
(3)        EUR 188 (Andasol I, Spain, trough, 2009)
(4)        AUD 236 (Greenough, Australia, PV)
(5)        AUD 397 (Solar Oasis, Australia, dish, 2014?)
(6)        USD 163 (Lazio, Italy, PV)
(7)        AUD 271 (Kogan Creek, Australia, CLFR pre-heat, 2012?)
(8)        USD 228 (New Mexico, CdTe thin film PV, 2011)
(9)        EUR 200 (Ibersol, Spain, trough, 2011)
(10)      USD 231 (Ivanpah, California, tower, 2013?)
(11)      CAD 409 (Stardale, Canada, PV, 2012)
(12)      USD 290 (Blythe, California, trough, 2012?)
(13)      AUD 285 (Solar Dawn, Australia, CLFR, 2013?)
(14)      AUD 263 (Moree Solar Farm, Australia, single-axis PV, 2013?)
(15)      EUR 350 (Lieberose, Germany, thin-film PV, 2009)
(16)      EUR 300 (Gemasolar, Spain, tower, 2011)
(17)      EUR 228 (Meuro, Germany, crystalline PV, 2012)
(18)      USD 204 (Crescent Dunes, USA, tower, 2013)
(19)      AUD 316 (University of Queensland, fixed PV, 2011)
(20)      EUR 241 (Ait Baha, Morocco, 1-axis solar thermal, 2012)
(21)      EUR 227 (Shivajinagar Sakri, India, PV, 2012)
(22)      JPY 36,076 (Kagoshima, Kyushu, Japan, PV, start July 2012)
(23)      AUD 249 (NEXTDC, Port Melbourne, PV, Q2 2012)
(24)      USD 319 (Maryland Solar Farm, thin-film PV, Q4 2012)
(25)      EUR 207 (GERO Solarpark, Germany, PV, May 2012)
(26)      AUD 259 (Kamberra Winery, Australia, PV, June 2012)
(27)      EUR 105 (Calera y Chozas, PV, Q4 2012)
(28)      AUD 205 (Nyngan and Broken Hill, thin film PV, end 2014?)
(29)      AUD 342 (City of Sydney, multiple sites, PV, 2012)
(30)      AUD 281 (Uterne, PV, single-axis tracking, 2011)
(31)      JPY 31,448 (Oita, PV?, Japan, to open March 2014)
(32)      USD 342 (Shams, Abu Dhabi, trough, to open early 2013)
(34)      USD 272 (Daggett, California, designed 2010)
(35)      GBP 148 (Wymeswold, UK, PV, March 2013)
(36)      USD 139 (South Georgia, PV, June 2014)
(37)      USD 169 (Antelope Valley, CdTe PV, end 2015)
(38)      AUD 137 (Mugga Lane, PV, mid 2014)
(39)      AUD 163 (Coree, fixed PV, Feb 2015)
(40)      AUD 298 (Ferngrove Winery, PV, July 2013)
(41)      USD 125 (Cerro Dominador, CST, mid 2017)
(42)      USD 190 (La Paz, PV, September 2013)
(43)      USD 152 (Austin Energy, PV, 2016)
(44)      AUD 304 (Weipa, PV, January 2015)
(45)      AUD 256 (Kalgoorlie-Boulder, PV, August 2014)
(46)      AUD 141 (new Moree Solar Farm, PV, one-axis tracking, December 2015)
(47)      AUD 184 (Brookfarm, PV, December 2015)


Conclusion

You can compare results with my LCOE graphic.

The LCOE for the Brookfarm project compares favourably with recent projects of similar size, e.g. Kalgoorlie-Boulder (AUD 256/MWh) and Ferngrove Winery (AUD 298/MWh in mid-2013, a scant 18 months ago).

Given the high cost of grid-supplied power in Australia, I expect the Brookfarm project will have a short payback period and will also attract favourable publicity.  I congratulate the proprietors.

Tuesday, November 18, 2014

Cost of solar power (46)

The Australian federal government is currently doing everything it can to destroy the local renewables industry.  That’s a scarcely believable situation, but it is true.  It merely reflects the very close relationship between the government and the fossil fuel industry in this country.

Even in gloomy times like the present, however, an occasional nugget of good news comes along.  In this case, it’s a large nugget!  Please read on …

Way back in 2011 when the current opposition was in government, there was a federal program called Solar Flagships.  The idea was to use government funds to provide substantial funding for large solar installations.  Early success was expected, to be followed by rapid build-up of a sunrise industry.

That didn’t happen.  The Solar Flagships program was not successful.  The targets were too ambitious, markets were not ready, human capital was not able to bring projects to a successful conclusion, power take-off agreements weren’t arranged and entrenched inertia against renewables was too strong.  A review of the experience is available here.  It is very blunt and makes fascinating reading.

One of the successful Solar Flagship proposals was the Moree Solar Farm, which I blogged about here.  It was for a utility-scale project (150 MW, AUD 923 million) at a good site in northern New South Wales, and was announced in June 2011.  My estimate for the Levelised Cost of Electricity (LCOE) was AUD 263/MWh.  (Please note, this is an adjusted figure, arrived at using 2% annual O&M cost, which is my current practice.)

The Moree Solar Farm proposal limped along in a near-death state for three years until just recently a revised proposal was announced for which funding was committed.  This project is going to go ahead as announced by ARENA here.

Construction and operation of the system will be carried out by Moree Solar Farm Pty Ltd, a subsidiary of the Spanish company FRV.  Construction will take place over 2014-15, so let’s assume that the launch will be in December 2015.

The new project will have peak power 56 MW grid-connected AC (70 MW DC ex-modules).  The total project value is AUD 164 million, of which ARENA is providing AUD 101.7 million.  The total estimated output over the 30-year lifetime of the system is 4,000 GWh, or 133.3 GWh per year.

From a technical point of view, the system will use polycrystalline modules and a single-axis tracking system.  I calculate the Capacity Factor will be 1000 × 133.3 / (24 × 365 × 56) = 0.272.  That is a little less than I expected for a system with single-axis tracking, but let’s stay with the estimate.

We can now proceed to analyse the LCOE using my standard assumptions:

  • there is no inflation,
  • taxation implications are neglected,
  • projects are funded entirely by debt,
  • all projects have the same interest rate (8%) and payback period (25 years), which means that the required rate of capital return is 9.4%,
  • all projects have the same annual maintenance and operating costs (2% of the total project cost), and
  • government subsidies are neglected.


For further commentary on my LCOE methodology, see posts on Real cost of coal-fired power, LEC – the accountant’s view, Cost of solar power (10) and (especially) Yet more on LEC.  Note that I am now using annual maintenance costs of 2% rather than 3% as in posts during 2011.

The results for the new Moree project are as follows:

Cost per peak Watt              AUD 2.9/Wp
LCOE                                     AUD 141/MWh

The components of the LCOE are:
Capital           {0.094 × AUD 164×106}/{133×103 MWhr} = AUD 116/MWhr
O&M              {0.020 × AUD 164×106}/{133×103  MWhr} = AUD 25/MWhr

By way of comparison, LCOE figures (in appropriate currency per MWh) for all projects I’ve investigated are given below.  The number in brackets is the reference to the blog post, all of which appear in my index of posts with the title “Cost of solar power ([number])”:

(2)        AUD 183 (Nyngan, Australia, PV)
(3)        EUR 503 (Olmedilla, Spain, PV, 2008)
(3)        EUR 188 (Andasol I, Spain, trough, 2009)
(4)        AUD 236 (Greenough, Australia, PV)
(5)        AUD 397 (Solar Oasis, Australia, dish, 2014?)
(6)        USD 163 (Lazio, Italy, PV)
(7)        AUD 271 (Kogan Creek, Australia, CLFR pre-heat, 2012?)
(8)        USD 228 (New Mexico, CdTe thin film PV, 2011)
(9)        EUR 200 (Ibersol, Spain, trough, 2011)
(10)      USD 231 (Ivanpah, California, tower, 2013?)
(11)      CAD 409 (Stardale, Canada, PV, 2012)
(12)      USD 290 (Blythe, California, trough, 2012?)
(13)      AUD 285 (Solar Dawn, Australia, CLFR, 2013?)
(14)      AUD 263 (Moree Solar Farm, Australia, single-axis PV, 2013?)
(15)      EUR 350 (Lieberose, Germany, thin-film PV, 2009)
(16)      EUR 300 (Gemasolar, Spain, tower, 2011)
(17)      EUR 228 (Meuro, Germany, crystalline PV, 2012)
(18)      USD 204 (Crescent Dunes, USA, tower, 2013)
(19)      AUD 316 (University of Queensland, fixed PV, 2011)
(20)      EUR 241 (Ait Baha, Morocco, 1-axis solar thermal, 2012)
(21)      EUR 227 (Shivajinagar Sakri, India, PV, 2012)
(22)      JPY 36,076 (Kagoshima, Kyushu, Japan, PV, start July 2012)
(23)      AUD 249 (NEXTDC, Port Melbourne, PV, Q2 2012)
(24)      USD 319 (Maryland Solar Farm, thin-film PV, Q4 2012)
(25)      EUR 207 (GERO Solarpark, Germany, PV, May 2012)
(26)      AUD 259 (Kamberra Winery, Australia, PV, June 2012)
(27)      EUR 105 (Calera y Chozas, PV, Q4 2012)
(28)      AUD 205 (Nyngan and Broken Hill, thin film PV, end 2014?)
(29)      AUD 342 (City of Sydney, multiple sites, PV, 2012)
(30)      AUD 281 (Uterne, PV, single-axis tracking, 2011)
(31)      JPY 31,448 (Oita, PV?, Japan, to open March 2014)
(32)      USD 342 (Shams, Abu Dhabi, trough, to open early 2013)
(34)      USD 272 (Daggett, California, designed 2010)
(35)      GBP 148 (Wymeswold, UK, PV, March 2013)
(36)      USD 139 (South Georgia, PV, June 2014)
(37)      USD 169 (Antelope Valley, CdTe PV, end 2015)
(38)      AUD 137 (Mugga Lane, PV, mid 2014)
(39)      AUD 163 (Coree, fixed PV, Feb 2015)
(40)      AUD 298 (Ferngrove Winery, PV, July 2013)
(41)      USD 125 (Cerro Dominador, CST, mid 2017)
(42)      USD 190 (La Paz, PV, September 2013)
(43)      USD 152 (Austin Energy, PV, 2016)
(44)      AUD 304 (Weipa, PV, January 2015)
(45)      AUD 256 (Kalgoorlie-Boulder, PV, August 2014)
(46)      AUD 141 (new Moree Solar Farm, PV, one-axis tracking, December 2015)


Conclusion

You can compare results with my LCOE graphic.

In the space of just over three years, the LCOE for projects at Moree fell from AUD 263 to AUD 141 per MWh, a 47% reduction (actually more if inflation is taken into account).  I think that would accord with the expectations of most observers.

The LCOE for the new Moree project can be compared with recent large installations in Australia on the list above: Nyngan & Broken Hill (AUD 205), Mugga Lane (AUD 137) and Coree (AUD 163).


What will be the LCOE in three years?  It seems to me that the future – in which utility-scale PV installations out-compete new-build fossil fuel projects – is nearly with us.

Tuesday, October 28, 2014

Cost of solar power (45)

I was born, raised and educated in Western Australia and still retain a soft spot for the huge state despite having lived elsewhere for 41 years.  So it’s a pleasure to write a feel-good story about a new PV installation at the South Boulder Wastewater Treatment Plant, 600 km inland from the WA state capital Perth.

The mayor of the City of Kalgoorlie-Boulder, Ron Yuryevich, says the installation
is the largest of the four solar PV installations undertaken by the City of Kalgoorlie-Boulder in the past two years and is another example of the City’s commitment to long term sustainability”.
Power from the 150 kW ground mounted installation will be used in the City’s waste water treatment plant.  100% of the waste water is re-used for watering of parks and sporting facilities, which is very useful since Kalgoorlie-Boulder has a semi-arid environment.  The system is estimated to provide electricity savings of $60,000 per year and also to provide CO2 abatement of 230 tonnes per year.

In technical terms, the system has 500 Suntech panels (each of 300 W), two 75 kW Fronius inverters and a Schletter racking system.  EcoGeneration reports that the cost of the system is $595,000 (including 10% goods and services tax).  The system was commissioned in August 2014.

As for the annual output of the system, the City of Kalgoorlie-Boulder kindly informed me that their projections were 260-270 MWh/yr.  Let’s take 265 MWh/yr, which corresponds to a Capacity Factor of (265 × 1000) / (150 × 24 × 365) = 0.20, a useful benchmark figure for future reference.

We can now proceed to analyse the LCOE using my standard assumptions:
  • there is no inflation,
  • taxation implications are neglected,
  • projects are funded entirely by debt,
  • all projects have the same interest rate (8%) and payback period (25 years), which means that the required rate of capital return is 9.4%,
  • all projects have the same annual maintenance and operating costs (2% of the total project cost), and
  • government subsidies are neglected.

 For further commentary on my LCOE methodology, see posts on Real cost of coal-fired power, LEC – the accountant’s view, Cost of solar power (10) and (especially) Yet more on LEC.  Note that I am now using annual maintenance costs of 2% rather than 3% as in posts during 2011.

The results for the Kalgoorlie-Boulder project are as follows:

Cost per peak Watt              AUD 4.0/Wp
LCOE                                     AUD 256/MWh

The components of the LCOE are:
Capital           {0.094 × AUD 595,000}/{265 MWhr} = AUD 211/MWhr
O&M              {0.020 × AUD 595,000}/{265 MWhr} = AUD 45/MWhr

By way of comparison, LCOE figures (in appropriate currency per MWh) for all projects I’ve investigated are given below.  The number in brackets is the reference to the blog post, all of which appear in my index of posts with the title “Cost of solar power ([number])”:

(2)        AUD 183 (Nyngan, Australia, PV)
(3)        EUR 503 (Olmedilla, Spain, PV, 2008)
(3)        EUR 188 (Andasol I, Spain, trough, 2009)
(4)        AUD 236 (Greenough, Australia, PV)
(5)        AUD 397 (Solar Oasis, Australia, dish, 2014?)
(6)        USD 163 (Lazio, Italy, PV)
(7)        AUD 271 (Kogan Creek, Australia, CLFR pre-heat, 2012?)
(8)        USD 228 (New Mexico, CdTe thin film PV, 2011)
(9)        EUR 200 (Ibersol, Spain, trough, 2011)
(10)      USD 231 (Ivanpah, California, tower, 2013?)
(11)      CAD 409 (Stardale, Canada, PV, 2012)
(12)      USD 290 (Blythe, California, trough, 2012?)
(13)      AUD 285 (Solar Dawn, Australia, CLFR, 2013?)
(14)      AUD 263 (Moree Solar Farm, Australia, single-axis PV, 2013?)
(15)      EUR 350 (Lieberose, Germany, thin-film PV, 2009)
(16)      EUR 300 (Gemasolar, Spain, tower, 2011)
(17)      EUR 228 (Meuro, Germany, crystalline PV, 2012)
(18)      USD 204 (Crescent Dunes, USA, tower, 2013)
(19)      AUD 316 (University of Queensland, fixed PV, 2011)
(20)      EUR 241 (Ait Baha, Morocco, 1-axis solar thermal, 2012)
(21)      EUR 227 (Shivajinagar Sakri, India, PV, 2012)
(22)      JPY 36,076 (Kagoshima, Kyushu, Japan, PV, start July 2012)
(23)      AUD 249 (NEXTDC, Port Melbourne, PV, Q2 2012)
(24)      USD 319 (Maryland Solar Farm, thin-film PV, Q4 2012)
(25)      EUR 207 (GERO Solarpark, Germany, PV, May 2012)
(26)      AUD 259 (Kamberra Winery, Australia, PV, June 2012)
(27)      EUR 105 (Calera y Chozas, PV, Q4 2012)
(28)      AUD 205 (Nyngan and Broken Hill, thin film PV, end 2014?)
(29)      AUD 342 (City of Sydney, multiple sites, PV, 2012)
(30)      AUD 281 (Uterne, PV, single-axis tracking, 2011)
(31)      JPY 31,448 (Oita, PV?, Japan, to open March 2014)
(32)      USD 342 (Shams, Abu Dhabi, trough, to open early 2013)
(34)      USD 272 (Daggett, California, designed 2010)
(35)      GBP 148 (Wymeswold, UK, PV, March 2013)
(36)      USD 139 (South Georgia, PV, June 2014)
(37)      USD 169 (Antelope Valley, CdTe PV, end 2015)
(38)      AUD 137 (Mugga Lane, PV, mid 2014)
(39)      AUD 163 (Coree, fixed PV, Feb 2015)
(40)      AUD 298 (Ferngrove Winery, PV, July 2013)
(41)      USD 125 (Cerro Dominador, CST, mid 2017)
(42)      USD 190 (La Paz, PV, September 2013)
(43)      USD 152 (Austin Energy, PV, 2016)
(44)      AUD 304 (Weipa, PV, January 2015)
(45)      AUD 256 (Kalgoorlie-Boulder, PV, August 2014)

Conclusion

You can compare results with my LCOE graphic.

For international comparisons, the LCOE should really be adjusted for the effect of the Australian goods and services tax.  That would reduce the estimates by 9.09%, giving AUD 233/MWh.  The LCOE is slightly high compared to recent international installations, but that reflects the fact that Australia is a high-cost place, even in spite of recent falls in the Aussie dollar.  Also Kalgoorlie-Boulder is a remote location with significant transport costs for hardware.


Tuesday, October 21, 2014

Cost of storage (2013 Sandia report)


We hear every day that the cost of storage is falling rapidly, with obvious implications for the prospects of renewable power generation.  I accept that most of these statements are made in good faith, but some are clearly optimistic.  Where can one find objective expert information about the cost of storage?

I was pleased to read a recent report (PDF, 12 MB) [1] from the Sandia National Laboratories that gives detailed information about the costs of various forms of storage.  The Sandia Laboratories were originally formed for nuclear research and still have major involvement with nuclear weapons, but they also undertake other forms of research, including energy and climate.  I would say Sandia has exceptionally high credibility.

The Sandia report is dated July 2013.  The authors first describe various uses of storage in the electricity system:
  • bulk energy services (energy time-shift, supply capacity)
  • ancillary services (regulation, spinning reserve, voltage support, black start, load following, frequency response)
  • transmission infrastructure services (upgrade deferral, congestion relief)
  • distribution infrastructure services (upgrade deferral)
  • customer energy management services (power quality, power reliability, retail energy time-shift, demand charge management)

They then survey the actual cost of installed systems.  In their words:
“More than 50 battery original equipment manufacturers (OEMs), power electronics system providers, and system integrators were surveyed and asked to provide performance, cost, and O&M data for energy systems they could offer for various uses of storage.”

Although some of the data comes from 2010 and 2011, all costs are expressed in 2012 USD.  The comprehensive cost estimates include:

  • energy storage system (equipment, installation, enclosures)
  • owner interconnection (equipment, installation, enclosures)
  • packing and shipping
  • utility connection (equipment, installation)
  • Balance of Plant costs (civil engineering only)
  • general contractor facilities
  • engineering fees
  • project contingency (@ 0-15% of install)
  • process contingency (@ 0-15% of battery)
The Sandia report thus gives a snapshot of storage costs in the U.S., as best as could be done in mid-2013.  Different metrics are provided such as round trip efficiency, installed cost in $/kW or $/kWh, and LCOE in $/MWh.

The figure below was prepared from data sheets in Appendix B of the report.  It shows the initial installed capital cost in $/kWh for 19 different types of storage installations.  The technologies do not include thermal storage of energy as in Concentrated Solar Thermal installations.  I have also omitted results for flywheel storage, as this is so expensive as to be off-the-scale in the figure.

Initial capital cost for storage systems (2012 USD / kWh).  Categories described below.


The categories are:


1          greenfield pumped hydro (bulk storage)
2          compressed air energy storage (bulk storage)
3          Na-S (bulk storage, utility T&D)
4          Na-Ni-Cl (bulk storage, utility T&D, commercial and industrial)
5          Va-redox (bulk storage, utility T&D, commercial and industrial)
6          Fe-Cr (bulk storage, utility T&D, commercial and industrial)
7          Zn-Br (bulk storage, frequency regulation, utility T&D grid support)
8          Zn-Br (distributed storage, commercial and industrial)
9          Zn-Br (small residential)
10        Zn-air (bulk storage, utility T&D, commercial and industrial)
11        advanced Pb-acid (bulk storage)
12        advanced Pb-acid (frequency regulation)
13        advanced Pb-acid (utility T&D)
14        advanced Pb-acid (distributed storage)
15        advanced Pb-acid (commercial and industrial)
16        Li-ion (frequency regulation, renewables)
17        Li-ion (utility T&D grid support)
18        Li-ion (distributed storage)
19        Li-ion (commercial and industrial)

It is important to note that project lifetimes differ for the various technologies – it’s 60 years for pumped hydro, 40 years for compressed air energy storage and 15 years for all the battery technologies.

The initial capital costs for pumped hydro (Category 1) and compressed air energy storage (Category 2) are very good.  (Incidentally other energy storage metrics, particularly Energy Stored on Energy Invested, are also very good for pumped hydro and compressed air energy storage.)  Category 6 (Fe-Cr technology) has good results for installations dating back to 2011.  Results for Category 10 (Zn-air technology) seem good, but the report notes these are for systems that might be built in the future.

Lead-acid systems (Categories 11-15) were still cheaper than Li-ion systems (Categories 16-19) at the time the report was completed.  The flow batteries (Categories 5 and 7-9) give mixed results, which one imagines will be improved with further development.

Conclusion

According to the Sandia report, battery storage costs are still quite high when all costs and the project lifetimes (15 years) are taken into account.  Battery technology is clearly developing quickly, and I look forward to follow-up reports from Sandia or other sources.

Anthony Kitchener is thanked for mentioning this report to me.

Reference

[1] A.A. Akhil et al., “DOE/EPRI 2013 Electricity Storage Handbook in Collaboration with NRECA”, Sandia Report SAND2013-5131 (July 2013).



 



Tuesday, August 19, 2014

Repeal of the RET


At the time of writing, it looks like the Australian federal government is going to destroy the Renewable Energy Target (RET).  The carefully-selected committee reviewing the RET is said to have reported to government, and no one in the renewables industry expects the news to be good.


[The wise adage of Sir Humphrey in the TV show “Yes Minister” springs to mind.  Never have a review unless you know what the answer is going to be.]


The RET is for 41,000 GWh of renewable energy to be delivered each year by 2020.  When the RET was established, this figure was anticipated to be 20% of the total electricity target, although falling demand and the onset of rooftop PV mean it is more likely to be about 28% of the market.


At the time, the fossil fuel industry actually wanted the fixed figure.  Now they are losing business, fighting dirty, and lobbying hard for the government to favour them by repealing the RET.


In this blog, I surely don’t need to write about the justifications for the RET.  We all know the facts about climate change, the subsidies dished out to the fossil fuel industry, the falling costs of renewables under supportive government policy, and favourable economic prospects in building the clean energy infrastructure of the future.


All the credible modelling studies that have been released show that maintaining the RET at its current level will actually save money for households over the long run.  The principal reason for this is that the additional capacity drives down the wholesale cost of electricity in the national electricity market.


So, it’s really clear.  The RET is generating jobs, contributing to a cleaner environment and saving money for households over the long run.  The only losers are the existing fossil fuel electricity generators, and they are the people that we have to shut down over the long run in any case.


In a delicious twist, key (right-wing) cross-benchers in the senate say they won’t support abolishment of the RET.  They correctly say it would break a direct election promise of the current government to maintain the RET.  We should observe however that these cross-benchers are populist and unreliable.


But the bleak fact is that the RET is only the outward manifestation of a deeper problem.  Simply by casting doubt around the renewable energy industry, the government is strangling investment.  This situation won’t change until we once again have bi-partisan policy in Australia towards renewables.


So, these are really bleak times in Australia.  I’ve written previously about the repeal of the carbon tax legislation, which I regard as a monstrously stupid decision.  Key government agencies (Climate Change Authority, Clean Energy Finance Corporation) are under dire threat.  The government is due to host the G20 Leaders' Summit in Brisbane later this year, and refuses to include climate change on the agenda as an economic item.  What a country!


However, let me finish on a positive note.  The renewables industry is fighting back, with great work being done by many not-for-profit agencies, including the Australian Solar Council of which I’m a member.


And that brings me to the actual point for blogging today.  Let me draw your attention to the TV advertisement funded by the Australian Solar Council.  I encourage you to take this message to your local member of parliament, as I’m going to do at this very instant.

Wednesday, July 16, 2014

A really bad decision


[This is dedicated to my unborn grandson, due November 2014.  It’s my way of explaining current developments to him.]

Sometimes governments make really bad decisions.  

I’m not talking about run-of-the-mill bad decisions, which any government might make as part of the complex process of politics and which can be easily reversed by the next government.  I’m talking about monstrously stupid decisions that will be incredibly hard to rectify, yet if left unrectified will be a huge burden for decades.

I’m talking about a decision so bad that our descendants will shake their head in incomprehension, sadness and, yes, anger.  They will ask how we could have been so badly and stupidly governed.

Today, the Australian government repealed its carbon tax legislation.  This tax was paid to the government by major CO2 emitters.  Money received was re-distributed to the electorate to reimburse costs passed on by emitters.  This was done in a reasonably fair way, with people on low incomes receiving preferential reimbursement compared to those on high incomes.

The carbon tax had been in operation in Australia for two years.  It was working [1]; CO2 emissions were falling as gas and renewables replaced coal-fired power generation and industry introduced new processes and saved energy in response to the cost signal.  Yes, there were losers in this process, particularly the coal-fired electricity generators.   But there were big winners too, particularly new industries based on renewable power and energy efficiency.  Jobs might have been lost because of the carbon tax, but jobs were created too.

It needs to be stated clearly why the carbon tax is a good thing.  Today there is a 97% consensus [2] among climate scientists that CO2 emissions from fossil fuels are changing the Earth’s climate.  The change will be slow at first and there are still many doubters and deniers, but the effects are cumulative and irreversible on the timescales of millenia.  In the worst-case scenarios air temperatures will rise 4°C by the end of this century.  The polar ice caps and glaciers will melt and the sea level will rise, thereby imperilling infrastructure and threatening the entire livelihood of those in countries like Bangladesh who live close to sea level.  More extreme weather events are expected, biodiversity will be affected, the oceans will become more acidic, and there will be adverse effects on human health.[3]

Every credible expert I’ve read says that it would be far better for humankind to act now to avoid problems caused by CO2 emissions, rather than to act in response once effects have occurred.

Meanwhile, the low-carbon future should also be viewed as a huge economic opportunity.  There are immensely powerful global drivers at work:

  • Decarbonisation of supply.  This is the switch towards solar and wind for electricity generation, and the introduction of new industrial processes that reduce CO2 emissions and save energy.
  • Pollution reduction.  Coal doesn’t only involve CO2 pollution, it causes many other problems as well [4].
  • Energy security.  Every country in the world wants an assured energy supply, not something that can be turned off at the whim of an autocratic regime elsewhere.
  • New-build infrastructure.  Just in case we forget, there are billions of people on this planet still without an electricity grid.  These citizens want the convenience of electrical power, and renewables will offer the easiest way for them to get it.
  • Manufacturing policy.  Some countries see the low-carbon future as an opportunity to strengthen their industrial base.  They will put in place initiatives to promote the interests of their own economies, including R&D incentives and government programs.

Our government is blind to these drivers.

And here is my special message to deniers who don’t accept the science of climate change.  The trend is not your friend.  Pioneers and early adopters are re-shaping the economic landscape across the world, and they will be rewarded for their foresight as the effects of climate change become more evident.  In contrast, those who seek to preserve the status quo – our local fossil-powered dinosaurs – will be left with stranded assets and a huge task to fix the mess that has been caused.

So even if you deny anthropogenic climate change, influential people in the rest of the world disagree with you, and they are today making cool-headed decisions in boardrooms in countries like Germany and China that will affect you tomorrow.  

Our fossil fuel reserves are undeniably finite, so we have to move to a clean energy infrastructure eventually.  But we now know that our fossil fuel gift from nature comes at a terrible price.  If we burn all the fossil fuels we will be hot, flooded, traumatised by weather, threatened by disease and morally weakened by the changes we have wrought to our planet.  We are literally threatening the prospects for human life.

There is a clear path forward that involves collaboration and good governance to move us to a low carbon and then zero carbon future.  It’s not even a difficult path, because it offers a cleaner and more comfortable environment, without economic disadvantage, as well as jobs in sunrise industries and better stewardship of our resources.  If costs to rectify the damage caused by global warming are taken into account, the low-carbon path actually involves lower costs than the present trajectory [5].

But the low-carbon path is challenged by those who want to preserve their current position and wealth, generally old men who manipulate the levers of power to their advantage. 

The repeal of Australia’s carbon tax means we lose valuable time to confront the challenges that we will inevitably face.  Apart from the Renewable Energy Target currently under fierce attack by the government, there is no replacement mechanism available in Australia to reduce carbon emissions.  The government’s proposed “Direct Action” scheme is so bad that it’s risible.  So bad, in fact, that it will not get through the upper house of parliament.  And any move towards an emissions trading scheme, offered as a sop by the cross-benchers in the senate as part of the repeal of the carbon tax, will not get through the lower house of parliament in the present government.  Past good work to reduce our CO2 emissions will be wasted, and we will be steered by government decisions into a fossil powered economic dead end, instead of towards the industries of the future.

I fear this decision will take years to unwind.  In its lust for temporary advantage, the Australian government is acting to harm fellow citizens of our world.  It is also reducing Australia’s capability to participate in the inevitable revolutionary development of Earth’s energy infrastructure.

All those who have contributed to this decision should hang their heads in shame. They are going to be very harshly judged by history.  A really bad decision indeed!

Notes

[1] Quarterly Update of Australia’s National Greenhouse Gas Inventory: December 2013.  Australian Government, Department of the Environment.  See particularly Figs 6 and 18.


[3] IPCC, 2014: Summary for policymakers. In Climate Change 2014: Impacts, Adaptation, and Vulnerability. Cambridge University Press (2014).

[4] P R Epstein et al., “Full cost accounting for the life cycle of coal”, Ann. N.Y. Acad. Sci. 1219 (2011), 73-98.

[5] N Stern, “Stern Review on the economics of climate change”, H.M. Treasury, London (2006).